Steve Irons (Swan, Liberal Party) Share this | Link to this | Hansard source

Tonight I rise to talk about the resources super profits tax and how it is affecting constituents in my electorate and what it will mean to Western Australia. I recently spoke about this subject in a matter of public importance but, as the third speaker with only five minutes, I was unable to give this matter all the gravitas that it requires.

Before I enter into my grievance I would like to say a special hello to Ann Jones, the wife of John Jones, who was aboard the flight that is lost in the Congo. Ann is a member of my FEC and has worked tirelessly for the Liberal Party for many years and her charity work with animals is second to none. Ann may be listening. Ann, my thoughts and those of my staff and the members of the Swan division are with you and your family. We hope and pray for the safe return of John. It is men like John who have built and been a part of the WA and Australian mining industry that supports many lives and families across our great nation.

Back to the subject: the implementation of the RSP tax by the Rudd government. In the 28 years I have been in business I do not think I have seen a more foolish act besides the disgraceful insulation scheme and the BER. I have heard people say that this will be the killer of the golden goose, but obviously they mean the killer of the goose which laid the golden egg. To put it simply, that is true. Small businesses in my electorate have already been affected and many more across Western Australia will also be hit hard by this tax. There has been much discussion about the RSP tax and the way it was introduced. The government has said it will pay for increased superannuation of three per cent and that all the workers will benefit from that. The employees may be the beneficiaries of this superannuation, but what they must realise is that it is not the RSPT that is paying for it; it is the employers and it will be coming off their bottom line.

So the line that the Rudd government is running out that the RSPT is responsible for the super is just not true. In fact, it is just more Rudd spin. The Rudd gang of four just do not seem to understand the mining industry. They do not understand return on investment and they certainly do not understand financing of the industry or how investment bankers and capital investment groups assess the risks and returns on investments, particularly in the mining industry. To arbitrarily nominate that anything above six per cent is a super profit, again, is just another headline and a load of Rudd waffle. Anyone who has run a business or owned a business knows that if you are going to risk capital you need a decent return. If you can get six per cent from bonds, why would you even bother to take the risk of developing or building up an exploration mine which is so risky? If you knew anything about business—and working for a union does not qualify as a business—you would know that there has to be a reward for risk and effort. This Rudd government has just taken the reward for effort away from the mining industry and the Prime Minister should dump this tax.

I do not know why the Prime Minister so dislikes Western Australia but his actions do speak louder than words. Mr Rudd promised us a fairer share of the GST in the lead-up to the 2007 election but, as a state, we only receive 68c of every dollar we raise in GST. It is just another broken promise. In 2007 Mr Rudd also said he would give us a WA infrastructure fund of $100 million. What is that? It is another broken promise. Why should we now believe Prime Minister Rudd when he says WA should expect—and ‘expect’ was the word—to get $2 billion from an infrastructure fund, raised from the RSPT? Mr Rudd, why should anyone in WA believe that and, to tell you the truth, most people in WA just do not believe you anymore. They have stopped listening to you.

I say to all Western Australians and to anyone who lives in Western Australia: anyone who supports this tax just does not like and does not want to support Western Australia. All the WA members of parliament who support this tax do not have Western Australian interests at heart. All the WA Labor candidates who support this tax and are out there spruiking their support of the RSPT certainly do not have Western Australian interests at heart.

Go out and tell all the families, the workers and the businesses who are supported by the mining and resource sector that you are supporting a tax that is going to ruin their lives. Go out and tell the local printer, the local courier, the local owner of the Telstra shop, the transport companies and the contractors who invest heavily in equipment to earn income from the industry that you support the tax that will ruin their income, their revenues and their lifestyles. And what about all the tradies that those on the other side continually say they support? What will you say to them when exploration in Australia dries up and they have no more work and they hear other people saying that this will not happen? Let me make a prediction, because the Prime Minister just does not get it: this RSPT tax will ruin not only the WA economy but eventually the Australian economy. The only way to stop this tax is to change the government.

For all Western Australians who may be listening, I am pleased to note today that the Premier of Western Australia announced that after 12 months of discussions and negotiations the state government has reached a historic—and I will use the word ‘historic’ because it seems to be used around here all the time—new agreement with BHP Billiton and Rio Tinto to amend iron ore rates payments from 1 July 2010. I quote from the Premier’s press statement. He said:

From July 1, BHP Billiton and Rio Tinto’s royalty rates will change from 3.75 per cent to 5.625 per cent to bring them into line with other iron ore producers and the companies will be able to integrate their Pilbara operations.

This will apply to all production by the companies and will generate an additional $340million in State royalties for the 2010-11 financial year—

which will benefit Western Australians. He goes on:

Under the Heads of Agreement signed today the companies will also make a joint one-off payment to the State of $350million—

another benefit to Western Australians. He said that there will be a one-off payment of $350 million to consolidated revenue when the bills reach royal assent, which will be placed in a special account for a new children’s hospital due to begin construction in 2012 and be completed by 2015. Overall, the new royalty rates are forecast to generate an additional $340 million in 2010-11 and $1.06 billion over the next four years. This is a good result for Western Australia, a win-win, as the Premier describes it. It was brought about by 12 months of consultative and open negotiations with the two mining organisations. The way the Premier has handled these negotiations could not be in greater contrast to the way the Rudd government has handled the resource rent tax announcement.

The Rudd government announced this policy without any real consultation and then proceeded to set up a sham consultation process whilst making the key element of the tax non-negotiable. This is a government that refuses to consult—not when taxing industries employing thousands and not even when changing flight paths over people’s homes, as we saw when the flight paths changed from and into Perth Airport in November 2008. Fortunately we were able to get up a Senate inquiry into that debacle as well, which the government senators voted against. This afternoon in this place I heard the member for Holt, the Parliamentary Secretary to the Prime Minister and Cabinet, talk about openness and transparency. Why did the Labor senators vote against a Senate inquiry into Airservices Australia that sought the truth? ASA declared at the Senate hearing in Perth that the noise issue was only a perception. The people of Swan, Pearce, Canning and Perth know that the aircraft noise caused by the flight path changes is not a perception. At a hearing two weeks ago in Perth, even staff from Stephen Smith’s office admitted that there was an issue with noise in Western Australia, particularly in Perth, from aircraft noise.

I go back to consulting. No consultation was done by the Rudd government with the mining industry, and that gives bad policy outcomes. The gang of four running this country at the moment are certainly no experts in business, yet they are making business decisions without seeking advice from or consulting with the people who know. This is no way to run a country, and their approach is doing enormous damage to Australia’s reputation overseas.

I will finish with some quotes from the industry, which I hate to admit is the usual form from the government to support their weak arguments on bad policies. Firstly, I will quote Anna Bligh, the Queensland Premier, who said:

You can’t expect international companies to make those investment decisions unless they’ve got absolute certainty about the costs of doing business.

Herb Elliott, another famous Australian, who is Chairman of Fortescue Metals, said:

We now have a huge new tax on the mining industry that will ultimately decimate future investments in new projects and have a negative impact on the value of your investment in our company …

He goes on:

It’s now clear that this means they have dropped on the Australian people a socialist-style funding and tax device where the government is now your silent partner … the keystone of this tax rests on a Government guarantee to refund 40 per cent of any losses not rebated through the tax system. It waits until a project has failed or reached the end of its life without having redeemed the tax credits. It is of course theoretical nonsense. Who believes that companies could fund 40 per cent of an investment on the strength of some future unbudgeted Government tax credit after it failed? No bank wants to fund a failed project on the premise that 40 per cent can subsequently, perhaps, be reclaimed through tax …. Jobs will be denied to tens of thousands of Australians who would have been employed on new projects.

Minara Resources have stated:

Under the new proposed tax, if the rules come in, it would be much more favourable to look at investments offshore.

With that, I will close and again congratulate the Premier of Western Australia for doing a consulted, negotiable, historic agreement with the mining industry.

Julie Owens (Parramatta, Australian Labor Party) Share this | Link to this | Hansard source

There certainly are a lot of myths and untruths out there about the resource super profits tax. We have just heard a few more in here tonight. I happen to believe that the resource super profits tax and reform of the tax regime for mining is good for Australia. I want to take this opportunity in this grievance debate to clear up some of the more ridiculous myths on the resource super profits tax. The first and the loudest one from the opposition—and we have heard it again tonight—is that it will reduce investment. At first glance, if you do not think about it or you are not particularly financially literate, it seems reasonable. How can a new tax increase investment? It can if one tax replaces an inefficient one, and that is essentially what is happening here.

Currently, mining companies pay for the use of resources that belong to us through royalties, effectively a tax on volume, payable whether they make a profit or not. The resource super profits tax replaces that with a tax on profit. The fact is that replacing an inefficient tax like royalties with an efficient tax like a super profits tax will drive investment, growth and jobs. Independent modelling supports that position. Remember that the Minerals Council, representing the mining companies, asked for a royalty system to be replaced by a profits based tax. There is general agreement that existing arbitrary and changing state royalty regimes result in less mining investment—and of course they do because they tax production and ignore the costs involved in generating that output.

In fact, mining companies pay a tax whether they make a profit or not. Because of that, many of our mines cannot get off the ground and others shut down too early, leaving good resources in the ground. As a consequence we leave far too many commercially viable resources in the ground, valuable resources that belong to the Australian people, purely because the current royalties regime makes them unviable. For low-value minerals and some less profitable mines, the outcome for the company of a new resource super profits tax is likely to be positive, not negative. If the threat of the mining tax was so real, you would expect mining stocks to be getting a bit of a beating at the moment. Yet in recent weeks, when markets around the world responded to the uncertainty in Europe, mining stocks in the Australian stock market performed better than other sectors, not worse. They also performed better than mining stocks in several of our competitor countries.

The Australian people own 100 per cent of Australia’s natural resources and they are not getting their fair share. We do believe that some mining companies can pay more tax, but let us keep this in perspective. When you hear the opposition’s claims that the sky will fall, remember that the government only wants to take the Australian people’s share of mining profits closer to where it was under the Howard government in the early 2000s—about halfway through the last government’s term and immediately before the last mining boom. Was the Howard government overtaxing the resources sector then? No, it was not, and nor will this government be. And nor did tax at that level prevent the mining boom which began around 2002. In fact, mining boomed with that tax load. But the Howard government took its eye off the ball. We enjoyed the boom but, arguably, we did not manage it to safeguard us for the future. The profits of mining companies rose but the Australian people’s share of those profits fell. Before the last boom, they got $1 in every $3 of mining profits through royalties and charges but at the end of that boom it was down to just $1 in $7.

There is a myth that the resource super profits tax will harm existing projects. That is also not true. We are negotiating transitional arrangements and general recognition of past investments. We have also heard a lot of claims about projects closing down—claims that have turned out to be exaggerated or false. We know that the mining companies have cried wolf over and over again. When land rights were introduced, they claimed that would end mining as we know it. The resources rent tax would end development in the petroleum sector. Of course, when we abolished Work Choices, that was also going to bring an end to mining. In the last 15 years or so, we have seen the mining companies claim the end of the world at least three times, and we need to take their claims with a little grain of salt.

There is also a particularly mischievous claim by the opposition that the resource super profits tax will cause consumer prices to rise. Independent modelling by KPMG Econtech shows that that is not the case. After all, the vast majority of the minerals subject to the resource super profits tax like iron ore in the Pilbara are shipped overseas at prices set on world markets. For those resources that are sold on domestic markets, Treasury analysis confirms that the super profits tax should not affect the price of gas and coal and, therefore, electricity. The Department of Resources, Energy and Tourism has also advised that it expects there will be no significant effect on electricity prices from the changed tax arrangements under current contracts between coalminers and electricity generators.

Then there is the most ridiculous myth that the RSPT is a triple tax on mining, coming on top of royalties and company tax. But let us make this really clear: resource companies will not pay the new resource super profits tax on top of royalties; they will pay the new tax instead of royalties. All companies in Australia are required to pay company tax but a few businesses receive as their primary input the non-renewable resources that belong to the Australian people, as mining companies do. Most companies pay for their inputs. The purpose of the resource super profits tax is to ensure Australians receive fair value for these non-renewable resources that miners extract from our country. No other business would try to argue that they should get their primary inputs for free, courtesy of the Australian people, just because they pay company tax and neither should Australia’s largest mining companies. The commonsense reality is reflected in the fact that the miners have always had to pay royalties to reflect the value they are receiving from our national resources.

The government will use about a third of the resource super profits tax revenue directly to assist the resources sector. The revenue from the resource super profits tax will well and truly be put to good use. A new infrastructure fund will make infrastructure spending a permanent feature of Commonwealth and state budgets for the first time. It will deliver $700 million in 2012-13 and more than $5.6 billion in the next decade. Without infrastructure funding, capacity constraints will hold back resource sector expansion and push up inflation and interest rates for us all. Roughly a third of the package will promote growth across the economy, addressing the risk of a two-speed economy by taking the brakes off the slower lane. The Howard government presided over the development of a two-speed economy where the non-mining related parts of the economy found it difficult to attract and retain workers and investment. Manufacturers in Parramatta tell me the same thing over and over again: the success of our resources sector drives up the exchange rate, making it hard for other Australian industries to compete on the global stage. In Parramatta, the two-speed imbalance affects the ability of smart new industries to start up and grow and for families it drives up inflation and interest rates.

A phased cut to the company tax rate to 28 per cent will assist the competitiveness of all Australian industries. The government will also seek to cut the company tax rate further as revenue allows. Small businesses will get a head start on the company tax cut with a 28 per cent rate applying from 2012-13. Small businesses will benefit from a new instant write-off for assets worth up to $5,000. Depreciation for other assets will be simplified, reducing complexity, cutting red tape and providing upfront tax relief. It is a good idea, a sensible idea, in a boom to put some of the returns aside for the future, and our plan does that. When you sell something that is non-renewable to pay for something that reoccurs every year, there is a strong case to save some of the revenues for the future. The final third of the revenue will do just that by going into national savings through superannuation.

Superannuation will gradually be increased from nine per cent to 12 per cent. Around 3.5 million lower paid Australians will receive a concession on their superannuation guarantee contributions for the first time. People aged over 50 with lower super balances will be given a more generous contribution cap to allow them to make catch-up contributions. Revenue from the resource super profits tax will cover revenue forgone from the lower tax rate of super contributions. This is a very good policy.

We know that a resources super profit tax will work in Australia because we have had one for over 20 years. The sky did not fall when we introduced it. Twenty years later the petroleum sector is still booming. The 40 per cent petroleum resource rent tax has operated on offshore petroleum projects since 1987 and, under it, petroleum production has remained strong. Indeed, Australia’s largest single investment, the Gorgon project, which was approved late last year, is to be developed under the 40 per cent petroleum resource rent tax. I am not going to deny the obvious—the most profitable mines in this country will pay more tax under the resources super profit tax. I am also not for a minute going to deny that owners of those mines will object. But this is good policy. It is in the national interest, and I am prosecuting for the interests of Parramatta families and singles who deserve a fairer share through higher retirement savings, more roads, more rail, more ports—(Time expired)